By Rebecca Melvin
New York, April 24 - Convertible market trading picked up some on Thursday, with a large, new deal about to price by Citrix Systems Inc. and as volatility events including earnings news continued. Volume was still relatively light, but there was a general bid to the market, which lifted many issues by 0.125 point to 0.25 point, one market player said.
Citrix's planned $1.25 billion offering of five-year convertible bonds edged up in the gray market ahead of final pricing expected after the market close.
The planned Citrix notes, which were talked to yield 0.25% to 0.75% with a 47.5% to 52.5% premium, were seen at 100.25 bid, 100.75 offered in the early gray market. A second source saw them a little lower at plus 0.375 point to 0.5 point.
Back among established issues, there was busy trading in some of the Chinese internet issues led by a selloff in SINA Corp. stock after news that the Chinese government is stripping the site of two online-publication and distribution licenses as it cracks down on internet pornography. The convertibles tracked lower with the shares, dropping to as low as 90.5 and then edged back up with a little bounce in the equity to 92.
There was a spillover of trade into YY Inc., a China-based social entertainment website, but those convertibles were left essentially unchanged on a dollar-neutral, or hedged, basis, a New York-based trader said.
There was some focus on solar names, a Chicago-based trader said, noting that SunEdison Inc. was active.
A second trader said his firm saw pretty active two-way flow, with some profit takers following a rally on Wednesday, but that the bonds were "holding in" well on Thursday, and even expanding slightly.
The SunEdison A tranche was seen at 155.5 versus the closing stock price of $20.26, and the SunEdison B tranche was seen at 158.5 versus the closing level. Both were seen up about 0.25 point on a hedged basis, assuming a delta of about 85%.
Internationally, Norway's Marine Harvest ASA priced €375 million of five-year convertible senior bonds at par to yield 0.875% with an initial conversion premium of 35%. And Madrid-based construction company Sacyr SA priced €250 million of five-year convertibles to yield 4% with an initial conversion premium of 25%.
Planned Citrix edges up
Citrix, a Fort Lauderdale, Fla.-based cloud computing solutions company, was seen trading up to about 100.25 bid, 100.75 in the gray market early Thursday, market sources said.
One market source said that he hadn't seen the new deal in the gray market ahead of final terms being fixed, but he expected the new bond would trade well, predicting it would move up to 100.5 to 101.5.
Citrix launched an offering of $1.25 billion of five-year convertible senior notes after the market close Wednesday.
At about the 100.5 level, the bonds modeled as fair value, a Connecticut-based analyst said. "At par, they were less than 1% cheap."
But a second source said the new issue was not cheap at all, but rich. Using a credit spread of 125 basis points and 30% volatility, the Citrix notes looked to be worth 99.5625 at the midpoint of talk, a Connecticut-based trader said.
A second source said that he used a slightly higher vol. of 31% to 32%.
The deal was structured to be attractive for hedged participation, but it was seen appealing to outright investors as well.
While the new deal was not viewed as the cheapest of deals, one trader pointed out that it was cheaper than other recent new issues including those brought by ServiceNow Inc., Akamai Technologies Inc. and Yahoo Inc.
The Rule 144A Citrix deal has a $187.5 million greenshoe and was being sold via bookrunners J.P. Morgan Securities LLC, Goldman Sachs & Co., BofA Merrill Lynch and RBC Capital Markets LLC.
Proceeds are earmarked to help fund $1.5 billion of share repurchases and to pay the net cost of a bond hedge.
China internets in play
Sina's 1% convertibles due 2018 traded down to as low as 90.5 and then back up to about 92, where it was marked at the end of the day versus a an underlying share price of $51.64, which was down $1.63, or 3.1%.
"The SINA stock was getting hit pretty bad, and we saw some heavy delta-fund profit takers," a New York-based trader said.
At one point, early in the session the stock was down 8%.
The convertibles tracked down along with the shares, and got down toward the 90 level, where some long-only buyers dipped their toe in at the lowest dollar levels and brought the price back up to 92, the trader said.
Trade "flowed through to YY," he said. But those bonds, the YY 2.25% convertibles due 2019, were flat on a dollar neutral basis, and marked at 91 at the end of the day with the stock at $64.80.
YY shares fell $3.77, or 5.5%, on the day.
"People had set these up heavier than the other Chinese names and they held in well despite what would seem to be pretty negative credit news," the trader said.
Marine Harvest prices
Marine Harvest, an Oslo, Norway-based seafood and salmon-farming company, priced €375 million of five-year convertible senior bonds Thursday at par to yield 0.875% with an initial conversion premium of 35%, according to a release.
The Regulation S offering came at the rich end of talked terms which were for a coupon of 0.875% to 1.5% and a 30% to 35% premium over the volume weighted average price of the company's Oslo-listed shares between launch and pricing. That price was NOK 72.00, or €8.7019, using a fixed exchange rate of NOK8.2741 per euro.
The bonds are non-callable for three years and then provisionally callable if the stock price exceeds 130% of the conversion price for a specified period.
Proceeds will be used for general corporate purposes including refinancing of debt.
Credit Suisse Group AG and Goldman Sachs International are acting as joint bookrunners for the Regulation S offering.
Sacyr prices new deal
Sacyr priced €250 million of five-year convertible and/or exchangeable bonds at par to yield 4% with an initial conversion premium of 25%, according to a news release.
The deal's size came at the lower end of a targeted range of €250 million to €300 million, and pricing of the Regulation S offering came at the cheap end of talk, which was for a 3.25% to 4% coupon and a 25% to 30% premium.
The bonds are freely convertible at in initial conversion price of €5.725 euros per share.
They are non-callable for three years and 21 days and then provisionally callable if the underlying shares exceed 130% of the conversion price during a specified period.
In addition, the company priced €166 million of new shares, representing 7.2% of the share capital. The price per share was €4.58 per share, which was a 2.9% discount to Wednesday's closing share price.
Sacyr is a Madrid-based construction company.
Mentioned in this article:
Citrix Systems Inc. Nasdaq: CTXS
SunEdison Inc. Nasdaq: SUNE
| Marine Harvest ASA: | Norway: MHG
|
| Sacyr SA | Madrid: SCYR
|
| SINA Corp. | Nasdaq: SINA
|
| YY Inc. | NYSE: | YY
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
